Cost-Plus Pricing Typically Does Not Result in Profit-Maximization

question 116

Multiple Choice

Cost-plus pricing typically does not result in profit-maximization.As a result, economists have two views of cost-plus pricing.One of these views is

• A)cost-plus pricing is more likely to lead to profit-maximization for large firms than for small firms.
• B)cost-plus pricing is a good way to approximate the profit-maximizing price when marginal revenue or marginal cost is difficult to determine.
• C)cost-plus pricing is more likely to lead to profit-maximization for monopolistically competitive firms than for oligopoly firms.
• D)cost-plus pricing is more likely to result in profit-maximization the more elastic the firm's demand curve is.

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Definitions:

Current Liabilities

Obligations or debts a company must pay within a year, including accounts payable, short-term loans, and accrued expenses.

Liquidity Problem

A financial situation where an entity cannot readily convert assets into cash without a loss in value, leading to difficulties in meeting short-term obligations.

Current Liability

Short-term financial obligations due within one year or within the entity's operating cycle, whichever is longer, impacting the company's cash flow and liquidity.

Current Earnings

The amount of net income that a company has earned during a specified period, usually the current fiscal quarter or year.